Japan's Nikkei gains for third day on China optimism; subdued earnings weigh

Japan's Nikkei stock average ended higher for a third straight session on Tuesday, as optimism about COVID-19 lockdowns ending in major trade partner China outweighed the drag from some disappointing financial results.

The Nikkei traded mostly sideways in the afternoon session to close 0.42% higher at 26,659.75, after briefly dipping into the negative territory in early trade before rallying with other regional markets after Chinese equities opened higher. Most of those gains, however, fizzled into the midday break.

Energy shares led gains among sub-indexes on the Nikkei, jumping 3.62% after crude oil rallied overnight on expectations for a recovery in Chinese demand.


The broader Topix added 0.19% to 1,866.71.

Sentiment was bolstered as Shanghai achieved the long-awaited milestone of three straight days with no new COVID-19 cases outside quarantine zones, which could lead to the beginning of the lifting of restrictions.

Uniqlo store owner Fast Retailing, which has many Chinese outlets, gained 0.67%. Department store operator Isetan Mitsukoshi Holdings climbed 5.27%.

Oil company Inpex jumped 5.64%, making it the second-biggest mover in percentage terms, after video-game maker Konami Holdings, which gained 5.65%.

The Nikkei began a three-day rally on Friday by surging 2.64%, but this week gains have been less than 0.5%, and Tuesday didn't see a new intraday high, but more of a consolidation around the 26,500 mark.

"With a lot of uncertainty still lingering around the external environment, it's difficult to chase stock prices higher," said a market participant at a domestic securities company.

Of the Nikkei's 225 component stocks, 124 rose versus 97 that fell, with four flat.

The biggest decliner by a long margin was brewer Asahi Holdings, which tumbled 10.86% after reporting an 83% drop in quarterly operating profit. Rival Kirin Holdings fell 4.25%.

Advertising giant Dentsu Group also sank on disappointing financial results, dropping 6.16%.